Industry News | March 4, 2009

CKE Blames it on the Rain

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CKE Restaurants (NYSE: CKR - News) announced today period one same-store sales decreased 0.6 percent for the four weeks ended Feb. 23, 2009, for Carl’s Jr. and Hardee’s.

Commenting on the company’s performance, Andrew F. Puzder, president of CKE, says, “On a two-year cumulative basis, blended same-store sales increased 0.9 percent. We believe the ongoing efforts of our competitors to drive sales by offering low-quality, discounted menu items negatively impacted sales at both brands. This tactic has been exacerbated in recent weeks by certain brands actually giving their food away. We have declined to participate in this tactic, focusing instead on offering premium quality products and maintaining the profitability of our brands. We believe our competitors will be unable to maintain this level of discounting long term as it has already severely impacted the margins at a number of brands. In any event, on a pricing basis, we have no intention of trying to compete with free because, no matter what anyone says, you can’t ‘make that up on volume.’”

“In addition, Carl’s Jr.’s core Los Angeles market recorded three times the amount of rain recorded in the prior year period and our other major California markets received nearly twice their average rainfall. Good news for the drought, bad news for sales.”

“Going forward, we anticipate that the current economic crisis and our competitors’ deep discounting will continue to impact sales and profits across our industry. To address these issues, we will place renewed emphasis on our consumers’ economic concerns by stressing, in our new products and in our cutting-edge advertising, the value of our premium products, particularly as compared to casual dining fare, rather than stressing low prices alone. While we will continue to promote the price and affordability of certain products through point-of-sale materials and couponing, we believe that focusing our television advertising on the value of our premium products will positively distinguish us from our competitors, drive sales at both brands and preserve our profitability over the long term. We will, of course, also continue our focus on restaurant operations, including service, cleanliness and order accuracy.”

“Hardee’s same-store sales increased 3.2 percent on top of a 1.6 percent increase in the prior year period. Hardee’s promoted the Chicken Parmesan sandwich. Media support for the product began at the start of the period. Hardee’s also featured Little Thickburgers during the period, as well as the Ham & Three Cheese Breakfast Burrito™ and Country Potatoes during the breakfast daypart. At the end of period one, Hardee’s average unit volume was $999,000, the highest average volume for the brand ever. We are now on the brink of surpassing our $1 million AUV goal for Hardee’s and are looking forward to setting and achieving a higher goal as Hardee’s sales continue their positive trend even in these difficult times.”

“Same-store sales at Carl’s Jr. decreased 3.6 percent versus a 1.4 percent increase in the prior year period. Carl’s Jr. featured the Charbroiled Steak Sandwich during period one. The sandwich features a charbroiled sirloin steak, topped with onion rings, lettuce, tomato and mayonnaise. Carl’s Jr. also introduced Green Burrito Crisp Burritos on Feb. 18. Each flour tortilla is filled with ground beef, cheese, and jalapeños, then fried and served with a side of hot sauce. The burritos are available in orders of three or five pieces, or can be substituted as a side item in a combo meal. At the end of period one, average unit volume at Carl’s Jr. was $1,525,000,” Puzder concludes.

“We will report same-store sales results for period two of fiscal year 2010, ending Mar. 23, 2009, on or about Apr. 1, 2009.”

As of its fiscal 2009 third quarter ended Nov. 3, 2008, CKE Restaurants through its subsidiaries, had a total of 3,110 franchised, licensed or company-operated restaurants in 42 states and in 14 countries, including 1,185 Carl's Jr. restaurants and 1,912 Hardee's restaurants.

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.